Bar Set High for Apple at 2008 Macworld Expo

SAN JOSE, Calif. – Steve Jobs has a tough act to follow at the Macworld Conference & Expo on Tuesday: himself.

At last year's trade show, Apple Inc.'s charismatic CEO hurtled into the cell phone industry with the iPhone, jettisoned the word "computer" from the Macintosh maker's name and launched the Apple TV set-top box.

Since then, Apple's stock has doubled, its computers' market share has grown and consumers have continued their love affair with iPod media players.

This year's announcements aren't likely to dazzle as last year's did. Jobs is expected to take the wraps off a movie-rental service, show off an ultra-portable laptop and maybe give the iPhone a faster connection to the Net.

"All I can say for certain is that Macworld 2008 is not going to top 2007. That was the Macworld of Macworlds," said Charlie Wolf, analyst at Needham & Co.

Still, Apple is expected to boom on. It has targeted sales of 10 million iPhones by the end of 2008, meaning the handset that combines the functions of an iPod, cell phone and wireless Web browser could account for roughly 1 percent of cell phones expected to be sold worldwide this year.

There is little doubt among observers — even its competitors — it can reach that goal.

Sales of the iPod, meanwhile, are still growing, though not as fast as before. And they could pick up steam again.

Analysts expect Apple to post record sales again this year despite concerns of an overall slowdown in consumer spending.

Wall Street predicts Apple will earn $5.09 per share for its fiscal 2008, up nearly 30 percent from $3.93 per share last year, on annual sales that will grow 32 percent to $31.7 billion, according to a poll of analysts by Thomson Financial.

In fact, Apple outpaced the overall PC industry last year. In its last quarterly report, for the period ending in September, the company sold 2.16 million Macs, up 34 percent from the year earlier and more than double the worldwide PC growth rate of 15.5 percent, according to IDC.

A halo effect from iPods has helped. Since the iPod debuted in 2001, more than 119 million have been sold, helping to propel Apple's market capitalization from $6 billion to $155 billion.

Likewise, analysts believe the iPhone will help lure more newcomers to the Mac platform. Apple's share of the PC market in the U.S. grew to 7.6 percent in the fall of 2007 from 6 percent the year before, according to Gartner Inc.

It's not that Apple can't go wrong. It's just that its recent streak of innovation and business execution has overshadowed hiccups along the way.

Apple found itself in the uncommon situation a few times last year of placating angry iPhone customers after it slashed the product's price and insisted on barring third-party programs from running on the handset, for instance.

Apple has since vowed to open the device to third-party developers but hasn't said how it will.

His latest projection of earnings of $5.05 per share on a 35 percent rise in sales in fiscal 2008 could prove conservative, he said, because it excludes revenue he expects Apple to draw from new products and services Jobs will unveil at Macworld and thereafter.

Here's where Apple is likely headed.

— It is going to the movies, likely announcing Tuesday the addition of movies for rent at its online iTunes Store for $3.99 apiece for 24 hours, the common window Hollywood has imposed on other digital movie rental services.

Apple will have lots of competition in this arena, but Apple "is setting the table for the consumer movie experience for the next 25 years," said Piper Jaffray analyst Gene Munster. "Today it doesn't matter but five, 10 years from now, it'll be how everybody will be watching movies."

Apple has reportedly secured deals with 20th Century Fox and Disney studios, and may be close to signing deals with Warner Bros. and Paramount.

The movie rental component on iTunes and a product upgrade are expected to also boost the anemic sales of Apple TV, the set-top box launched at last year's Macworld that delivers video and other multimedia content from your PC to a television.

Munster estimates about 1.8 million Apple TV devices were sold through 2007 and expects another 2.9 million units to ship this year.

— It's going on a diet. A prevailing theory is that Jobs will unveil an ultra-portable notebook, weighing somewhere between 2 and 4 pounds, that would fill a hole in Apple's computer lineup.

American Technology Research analyst Shaw Wu predicts the slim "MacBook Mini" could be priced at $1,500 to $2,000 and could feature a flash memory drive instead of a standard hard drive to reduce the weight, boost battery life, and make it more rugged and reliable.

— And it's going faster. As in 3G, a speedier cellular network option for Web browsing or other data features on the iPhone.

Apple may not be ready to discuss this at Macworld, but its carrier partner AT&T Inc. has already revealed that a 3G iPhone is planned for 2008.

Even though Apple is staying mum until Tuesday, it's still got everybody else talking.

Macworld runs Tuesday through Friday at the Moscone convention center in San Francisco.